Medical Professionals Are Investing In Multifamily Properties.

Multifamily Properties

Doctors require various investments to build a solid financial portfolio and preserve financial stability. Doctors should invest in commercial real estate and multifamily properties because they are less volatile than stocks, have great potential for exit growth, and offer competitive annual returns.

A multifamily property is an excellent choice for doctors looking to invest passively in real estate because these homes offer good cash flow options that can help them build wealth over time. In addition, physician investors can generate passive income by investing in multifamily properties with the correct information and direction, enabling them to make more tax-advantaged money whether or not they work the same hours at their practice.

Before making a multifamily real estate investment, some points are essential. 

  • Retail, office, and industrial assets are all included in commercial real estate. However, multifamily, just a rental property with five or more units, is still the retail real estate sector performing the best overall.
  • Some doctors participate by making direct real estate purchases, while others invest idly as Limited Partners (LP) in multifamily real estate syndications.
  • Active real estate investing necessitates extensive expertise and attention to detail to locate deals, secure deals, carry out the business plan and manage the value daily. Real estate investors can benefit from the sponsorship group’s contacts and experience by engaging in passive real estate investing.
  • Commercial real estate offers a few tax advantages over other types of investments. For example, you can use the depreciation deduction to reduce any income you receive from your investment property by using straight-line depreciation or a cost segregation study to accelerate depreciation “paper losses.”

Reasons doctors should invest in multifamily property.

Multifamily real estate is remarkably stable and exhibits little volatility before passively investing in commercial real estate as a doctor, especially when compared to stocks. In addition, commercial real estate with multifamily units has strong growth potential and significant profits.

Retail, office, and industrial assets are all included in commercial real estate. Multifamily, a rental property with five or more units, is still the commercial real estate sector performing the best overall. Some doctors participate by making direct real estate. 

Purchases, while others invest idly as Limited Partners (LP) in multifamily real estate syndications.

Multifamily real estate can be a terrific way to diversify your investment portfolio and add stability.

Advantages of multifamily property investment

One of the main reasons to engage in real estate is that it gives a chance to create a passive income stream separate from your practice, which can accomplish five beautiful things.

  1. Build wealth by paying off debt and generating income from real estate

Most healthcare workers are heavily indebted; even just a few years ago, the typical medical school debt was already close to $200,000. So even if you are generating six figures, devoting a percentage of the Doctors salary to paying off that debt would drastically restrict your lifestyle and the money required to run the practice.

This financial situation can be improved by reducing debt load through real estate revenue, enable to get more enjoyment out of the money they work so hard to acquire.

Medical practice differs from any other business because it depends on cash flow. Cash flow from renting real estate will help to grow practice and industry, whether Doctors want to upgrade the waiting area, lease a better office space, or buy cutting-edge equipment.

  1. Real estate can help you pay less in taxes.

In addition to the additional financial difficulties they bear, physicians who frequently fall into the highest tax brackets may also be hit with punitive taxes (namely, medical school debt). Real estate ownership can be used to lower taxable income from your portfolio of investments. Along with adding a new source of income, this is also done.

 Taxable income from passive assets can be reduced by deducting real estate business expenditures, including upkeep, maintenance, repairs, property management fees, and even travel charges for checking on their properties.

  1. Use real estate to create generational wealth.

They probably have a retirement plan if they’re like most professionals. However, because individuals live longer these days, their life after retirement will be considerably longer. Consequently, living a decent life after retirement frequently takes more money than initially anticipated.

Sadly, even a retirement plan with a six-figure balance might not be enough to support during retirement. Additionally, it would help if you had assets that continue to generate money for three generations to create generational wealth.

  1. With an additional passive income source, you can enjoy life better.

Real estate, and multifamily apartment buildings, are excellent sources of passive income. Building wealth through real estate can assist in achieving the following goals: more significant savings, a reduction in working hours, an earlier retirement, more frequent luxury trips, a more excellent car, or anything else that calls for more money.

Over the past few years, inflation has been rising, and assets that help develop wealth, like real estate, can act as a buffer against the impacts of the dollar’s depreciation.

In other words, even while income gradually loses purchasing power, real estate (which may be turned into liquidity) can act as an inflation hedge.

  1. Multifamily real estate frequently performs better than the stock market.

Regarding retirement or passive income, the stock market is regarded as the gold standard by most 9–5 employees. After all, equities, bonds, or mutual funds make up the majority of every single 401K or 401B. So naturally, there are alternate investments, such as funding a business.

When risk and inflation are considered, multifamily real estate has consistently beaten the stock market for decades.

Multifamily real estate begins paying off straight away. A stock portfolio may take years (or even decades) to produce significant growth; tenants must pay rent each month, whereas equities only pay out quarterly (and not all stocks provide dividends).

Conclusion

Doctors are investing in multifamily properties because it’s an excellent way to build wealth and diversify their assets. You can own half a building or two, run your practice from the business end and make money off the rent. It’s also a solid investment option because when it boils down to real estate investing, there is nothing better than multifamily properties. 

If you want to know more about Why Doctors invest in Multifamily Property, Then schedule a free call with us.

How To Add Value To A Real Estate Investment?

value add real estate investment

The popularity of “value-add” investment strategies is rising across all real estate industries as a result of Covid-19. Following the pandemic’s destruction of the previous model of core or low-risk, low-return properties, such as those with lengthy leases, many investors are searching the market for dependable and resilient returns through value-add real estate investments, which are reflected in upgraded structures.

Let’s define what we mean by “adding value to a real estate investment” first. A real estate investment that has undergone internal or external repositioning or modification with the goal of raising its value or cash flow and making it more appealing to a buyer or resident is known as a value-add investment. These investments can range from little adjustments like painting walls or changing furniture to significant undertakings like property expansions, depending on whether they need a lot of capital, labor, or both.

How To Add Value To Property

Three ways exist for us to add value:

  1. Increase in Market or Natural Value

Market or natural appreciation is the first way that real estate owners or investors can raise the value of their investments. Here, an investor makes an investment in a rapidly expanding market with a high employment rate, a rising population, and a positive net migration rate. By making investments in these markets, you will inevitably enhance the value of your real estate, which will force you to gradually raise rents to keep up with the expanding market.

  1. Renovating or refurbishing real estate

By using a “value add” technique, you can actively raise a property’s value rather than wait for the market to rise. This entails improving or renovating some aspects of the property. Using a residential building as an example, you could install new appliances in the kitchen, such as a refrigerator, oven, and dishwasher, as well as paint the entire apartment. You will be able to raise the rent due to these aesthetic and practical upgrades, and the resulting increase in rental income will raise its net operating income (NOI). The NOI and the property’s value are inversely associated; as the NOI rises, the property’s value decreases, and vice versa.

  1. Offering facilities or services

Creating other revenue streams in addition to rent is another strategy to increase the value of your real estate property. If you offer amenities like a gym for an apartment building, a common area for socializing, and services like cleaning and laundry, residents will find your property more appealing and convenient than if you leave them to find these things on their own, which will raise the value of your property.

Value Add Real Estate Property Definition And Strategy

Benefits Of Adding Value To Property

An investment property’s overall cash flow is increased by adding value since costs like repair and upkeep are either eliminated or decreased because they are less likely to occur. Contrary to the core or core plus properties, this raises the value-add investment’s NOI (Net Operating Income), resulting in higher returns for the investor and a higher ROI compared to core investments. Some investors have a tendency to sell the property right away after renovations or to cling onto it in a down market and then sell it when the market picks up in an effort to profit from the increased worth.

Things to Watch Out for When Adding Value To Real Estate Investment

Understanding the REAL condition of the property is essential when selecting value-added real estate.

Operators frequently underestimate the amount of money necessary to invest in order to improve an asset’s stability.

In order to make sure you have the right business plan in place to improve your asset performance when using a value-add real estate investment strategy, you must thoroughly examine every step of your underwriting procedure.

Analyzing the level of risk you are prepared to accept as an investor is also crucial. The more “value” a property needs to stabilize itself, the higher the asset’s risk level.

Final Thought

During this time period, it is important to be aware of the many ways in which an investor may add value to their real estate investment. By taking these steps into consideration, you can make sure that your investment has the best possible chance at long-term success and growth.

Are You Interested In Learning More About How To Add Value To A Real Estate Investment? Then, contact us to arrange a free strategy call.

Benefits of Investing In Multifamily Real Estate

Multifamily real estate

You’re considering making a real estate investment. There are several compelling reasons why you might want to focus on a certain sort of property: the multi-family home, regardless of whether you’re hoping to become the next real estate billionaire or simply need a duplex to help pay your mortgage.

Multifamily real estate, as the name suggests, contains multiple family units within a single structure or complex (as opposed to a single-family dwelling). Although they come with a lot of potential for income and property growth, they also come with additional responsibility and risk.

Let’s discuss the positives of investing in multi-family properties.

What do multifamily properties consist of?

Multiple independent dwelling units are combined to form a multi-family home or complex. Each apartment has its own address, a separate entrance, and living spaces from the other units. There are numerous separate households/tenants, but there is only one building owner, who may be a person or a business.

Multifamily properties already make up more than 30% of all housing in the United States, so there is a lot of room for growth as well as opportunities for investment. These kinds of residences serve as income producers for the investor by providing consistent cash flow from the rent the tenants pay. Additionally, there is a chance that the value of the real estate will increase over time.

Types of multi-family buildings

There are many different types of multi-family dwellings, ranging in size from two to 2,000 units. You can invest in a variety of multifamily properties, including: 

Triplexes, quadplexes, and duplexes– These properties, in that order, have two, three, or four units. This kind of property might be “house-hacked” by allowing you to live in one unit while renting out the rest. These are frequently eligible for standard mortgages or owner-occupied financing.

Apartments – Apartment complexes are multi-unit structures that are owned by a single party.  Usually, management is present. This kind of property requires financing through a business loan.

Condominiums –  Although they can also take the form of town- or row houses, condos frequently resemble flats. Contrary to apartments, which are typically rented out, condos are privately owned, while the common areas are shared and overseen by a homeowner’s organization (made up of the condo residents).

Mixed-Use – A multifamily building with mixed uses mixes living space with retail, business, leisure, or cultural venues. Housing for students. These complexes, which are located close to institutions, are made with students in mind.

Age-Restricted – These kinds of multi-family residences typically only allow those 55 and older to live in them. The structures, amenities, features, and activities are designed with this age range in mind.

Income-Restricted –  Those with lesser incomes can purchase a property with the support of subsidised housing. To construct these units, the federal government frequently collaborates with developers. If you make an investment in this kind of real estate, you might be eligible to accept federal housing choice vouchers.

Why you should invest in multi-family real estate

Comparing multifamily investment properties with other types of investment properties, there are certain clear advantages.

Increase revenue

MultiFamily homes are built to generate income. Each unit’s space is utilised as well as possible to increase renter traffic and revenue. Compared to renting a single-family home, they can provide significantly more income.

Quickly increase your real estate portfolio

Multifamily properties could help you amass a significant number of units more effectively if you’re trying to become a serious real estate investor.

It’s much simpler to manage because you can invest in bigger deals and buy more units rapidly, according to Pineda. “You acquire a multi-family property with 20 or even 200 units in one transaction, rather than having to buy and renovate 20 single-family homes and manage 20 distinct loans.”

Strategically boosting the property’s worth

Investors who purchase multi-family real estate also have the chance to benefit from capital growth should they ever decide to sell. Since the value of the property is determined by how much net operational income you have rather than by how much the apartment next door You are rewarded according to how much money you can produce, and there are clever ways to generate income and boost the worth of a property, such as cutting vacancies, raising rents, or improving it.

Reduce your living expenses

Investors in multi-family buildings with four units or fewer frequently occupy one of the units, making them eligible for owner-occupied financing (which is similar to a regular residential mortgage and comes with a lower interest rate). Of course, they don’t pay rent (or pay it to themselves).

Compared to other investments, less risky

Even during economic downturns, multi-family property often provides investors with predictable cash flow and lower risk. After all, everyone requires a place to live. Recessions have a greater impact on other real estate categories, such as industrial, retail, and office space, so they pose a greater danger.

Conclusion

A unique way to increase your investment portfolio and produce income is through multi-family real estate investing. Now would be a fantastic time to invest in multifamily properties if you were thinking about it! To learn more about our current multifamily investment possibilities, please contact us at Growth capital group if you’re interested in learning how to start investing in multifamily through real estate syndications.

Investing In The Stock Market Vs. Multifamily Real Estate

multifamily real estate Vs stock market

There is no doubt that many people have invested in multifamily real estate to build their wealth over time. Similarly to this, many people have made substantial financial gains through stock market investments. 

Investing In The Stock Market

A stock market is an investment tool that allows you to purchase shares of publicly traded companies. You can buy individual stocks or invest in mutual funds or exchange-traded funds (ETFs). There are many different strategies for investing in the stock market, but they all have one thing in common: They allow you to buy and sell your holdings whenever you want. For example, if you own shares in Coca-Cola (KO), you can sell them whenever the price goes up or down.

Investing In Multifamily Real Estate

Multifamily real estate refers to investing in apartment buildings where more than one family lives. This type of property has historically provided strong returns for investors because of its low vacancy rates and high rents compared with single-family homes and other types of commercial properties. It also provides diversification across multiple tenants within each building, which helps reduce risk overall when compared with owning one property at a time.

Some investors choose to invest in the stock market, while others opt for real estate. But is one better than the other?  Multifamily real estate has several advantages over the stock market:

Low volatility 

The average annual return for multifamily real estate is 4 percent, which means that it doesn’t fluctuate as much as stocks do. This makes multifamily real estate less risky than stocks and more stable as an investment vehicle.

One of the biggest reasons why many people choose to invest in multifamily properties is because they can offer a stable revenue stream over time. When compared with other types of investments like stocks, bonds or real estate investment trusts (REITs), multifamily has very low volatility which means that investors don’t have to worry about sudden changes in market conditions affecting their income. This makes it easier for them to plan their budgeting and spending while ensuring that they get regular income regardless of what happens in the economy at large.

Diversification 

The main advantage of multifamily real estate is that it can diversify your portfolio and protect against risk. When one type of investment goes down, another may go up simultaneously. For example, if you have all your money invested in stocks and they crash, you’ve lost all of your money unless you have other investments that complement what’s gone down in value (or vice versa). That said, when investing in multifamily properties, it’s important to spread out your holdings across multiple locations so that if one area has trouble getting financing or has market conditions that don’t work well for the property, then another property could still be doing well enough to cover any losses from the first property. 

Low-Cost Passive Income

Most multifamily properties generate income from rent and appreciation (or depreciation). The first one is easy to understand — if you have a tenant who pays rent on time every month without fail, you’re earning passive income that keeps coming in while you’re asleep or at work! Appreciation happens when your property increases in value over time due to inflation and appreciation trends.

Leverage 

Multifamily real estate allows investors to leverage their money by using other people’s money (OPM). OPM allows investors to buy more property with less of their own cash upfront. The more properties you can buy, the more money you make!

The biggest benefit of multifamily real estate investing is that you are able to use debt in order to buy your investment property. This means that you can purchase a property with money that you don’t actually have in your bank account!

For example, if you put down $10,000 on a $100,000 apartment building and took out a loan for $90,000, your down payment would be 10% ($10,000/$100,000). If you sold your property for $110,000, you would have made $10,000 ($110,000 – $100,000 – $90,000 -$10,000). However, if you had chosen to invest in stocks instead, you would need all those funds upfront to make an investment.

Cash flow 

Cash flow is a measure of how much money is coming into your business and how much money is going out. In real estate, cash flow is typically positive (meaning there’s more coming in than going out). But if you invest in stocks or bonds, you’ll probably see negative cash flow until you sell your investment.

Multifamily properties produce cash flow every month, unlike stocks that only pay dividends quarterly or twice a year at best. This means that if interest rates rise, as expected in 2020, rents will go up too because landlords will have no choice but to raise rents for new tenants who want to live there!

Tax Advantages

One of the biggest benefits of investing in multifamily real estate is that it’s tax-advantaged, especially when compared to stocks and bonds. When you sell a stock or bond, you must pay capital gains taxes on any profit. However, suppose you sell an apartment building or other commercial property. In that case, all gains are considered “capital gain” rather than “ordinary income,” which means they are taxed at 20% rather than 39% (for individuals).

One of the primary benefits of investing in multifamily real estate is deducting your mortgage interest and property taxes from your federal income taxes. In addition, if you’re like most people, your state and local governments will also give you a property tax deduction. These deductions can significantly reduce your income taxes, meaning thousands more dollars in your pocket for multifamily investment properties.

Final Thought

Real estate might sound like a safer option, but if you choose multifamily real estate as your investment vehicle, you have the ability to diversify and mitigate risk. This gives you more control over your financial future than playing a game of chance in the stock market. If you prefer something less risky and more conservative, however, multifamily real estate may be your better choice.

Schedule A Free Strategy Call To Know More About Multifamily Real Estate Investing. Growth Capital Group Is Here To Help You.

How Investing In Multifamily Could Help You Retire Early?

Multifamily Investing

You’ll need to make wise investments if you want to retire early. So you should give real estate investing considerable consideration.

Real estate investing is one of the few financial strategies practiced since civilization’s dawn. From antiquity to today, huge landholdings have always represented power and dominance. In a time when there are many investment possibilities accessible, such as mutual funds, gold, bitcoin, ETFs, debt funds, and so on, real estate is a reliable and tried-and-true investment option. 

Here are several ways investing in real estate could help you achieve financial security and earlier retirement. 

Start Planning Early in multifamily investing: If you want to retire early, you should do so as soon as possible. As soon as you start receiving money, you must begin investing. Find a nearby real estate investment group if you just started work, and support as soon as you have a sizable sum of money. Then, you are in your prime, your family is not obligated to you, and your liabilities are virtually nonexistent. 

Renting properties: If you had more rental properties, it would be simpler for you to retire early. When your income rises, you must invest in properties with a high rental yield. When selecting homes for rental income, having a good location is essential. Significant investments will yield lower rental revenue in isolated areas where development is less likely than in regions with reliable transportation. You’ve decided to retire early, so having various rental properties will allow you to continue earning money once you stop working. 

Adapt Your Investment: A property may not always be as profitable or rent-producing as it once appeared, despite rigorous examination. Be ready to sell the property in this situation, possibly at a loss, and reinvest your funds elsewhere. In addition, planning your early retirement income will be more straightforward if you’re ready to change your investing strategy. 

Early retirement requires planning, being well-organized, and acting quickly. However, if everything goes as planned, you may enjoy an early retirement with a property income.

Benefit From Tax Breaks:

Real estate investors must pay taxes on their revenues just like people who earn other types of income. Consider setting aside 20% to 30% of your monthly payment for state and federal taxes.

Due to the increased tax incentives associated with real estate investments, keep meticulous records of all earnings and spending. These breaks eventually result in savings that produce wealth more quickly.

You can save money by deducting business-related expenses if you own rental properties. That covers the price of yard work, improvements, appliance upkeep, and more.

If you offer low-income housing, you can qualify for tax incentives. Benefits may differ from state to state or city to city, so check

Reduce Your Debt:

When you intend to retire early, you will need to make some difficult financial decisions early in your life. With the advent of cutting-edge real estate instruments like Real Estate Investment Trusts (REITs) and fractional investment alternatives, one can start with a small sum and increase it like a Systematic Investment Plan; investing in real estate is no longer limited to buying a plot of land or an apartment (SIP)

Multifamily Investing Is Less Erratic

Compared to other investment possibilities, the real estate market is less volatile—multifamily real estate investment creates a tangible asset that the owner has total control over. Since real estate is not based on market conditions, it is less risky.

In most circumstances, a property’s worth increases, and one can also remodel, build, or otherwise alter a property to increase its value. According to experts, real estate is one of the most reliable and secure long-term investment possibilities. One may live there after retiring, use it for personal purposes, or sell it. Additionally, the property can be saved for upcoming generations. You can also put together a portfolio of unrelated investments.

Supplementary Source Of Income:

People frequently buy a house and then advertise it for rent after that. As a result, they now have real estate as a secondary source of income in addition to their main one. Moreover, rent revenue is frequently invested further in savings accounts, term deposits, etc., where one can earn a sizable rate of return.

When opposed to residential homes, commercial property often generates more considerable rental income. Therefore, they can maintain a reasonable standard of living because of this additional income. The average yearly appreciation rate for retail buildings in India is 3.5%.

Income From Multifamily Investing:

As of 2022, average property values in India will increase at a pace of 6%, so if you intend to invest in areas that will undoubtedly see development in the future, you have a good chance of making an adequate profit. If you finance long-term, you can lease the property and receive monthly rent payments. You can put the house on the market and sell it for more money as you get closer to retiring.

However, several times, a property may only be as profitable if you conduct an in-depth study before investing. Therefore, you must invest a reasonable amount of your money in the real estate business.

Conclusion:

One of the most crucial choices a person must make is how to have a stress-free and tranquil retirement. Your post-retirement days will be taken care of by a retirement plan, which will also make you aware of the obstacles you’ll probably face in the future. 

Early investment will ensure one is financially comfortable in retirement and help one learn the benefits and drawbacks of various assets.

Are You Interested In Learning More About How Investing In a Multifamily Could Help You Retire Early? Then, schedule A Free Strategy Call With Growth Capital Group.

 

The Incredible Tax Benefits of Multifamily Investing.

Multifamily Investing

Multifamily investing is a great way to invest your money and earn income from real estate.

Multifamily investing is the process of purchasing and managing multiple rental properties. Depending on your goals and financial situation, you can own one multifamily property or several at once. A single-family home is usually not considered a “multifamily” property because it only has one unit, but many people consider duplexes and triplexes as multifamily properties.

Multifamily investing is buying multiple properties you rent out and manage, either on your own or with a team of other investors.

The main benefit of multifamily real estate investing is that you can earn a steady income without worrying about tenants paying their rent or moving out on short notice. That’s because the rents are typically guaranteed by long-term leases renewed automatically every year or every two years.

What Are The Tax Benefits Of Investing In Multifamily Properties?

Investing In Multifamily Properties is a great way to generate passive income, but it also comes with some incredible tax benefits.

1. Depreciation: The federal government allows you to deduct a portion of the cost of acquiring or improving a rental property each year. This deduction is called depreciation and allows you to recover some of your investment over time rather than having it all taxed immediately at its full value. The IRS sets annual depreciation limits based on when you acquired the property. Still, most investors use accelerated depreciation methods that allow them to deduct more costs upfront than allowed under normal rules.

You can depreciate a rental property over 27.5 years (residential) or 39 years (commercial). This means that each year, you can deduct a portion of the cost basis from your taxable income. This reduces your tax bill dollar for dollar.

When you purchase an apartment building or any other type of real estate investment property, you can write off the cost over time using depreciation deductions. Each year, you will be able to take a percentage of the purchase price as a deduction from your income taxes

Depreciation is a helpful tool for balancing positive cash flow created on an investment property, regardless of whether the investor uses a cost segregation study. This is true whether a property is owned wholly or through a partnership. 

2.Tax Rates- Ordinary income and capital gains taxes are usually the two types of taxes that apply to investments of all kinds. When the investment generates income, you must pay regular income tax; when the asset is sold, you must pay capital gains tax. Ordinary income tax rates at the federal level can reach as high as 37%, while capital gains taxes typically have a peak rate of roughly 20%. These rates do not consider the passive investor’s 3.8% net investment tax levied on rental income and capital gains. Additionally, states frequently impose additional taxes.

Stocks that provide dividends and real estate cash flows are typical income properties. However, the cash flows created by real estate can be offset by depreciation and interest charges (see above), whereas the income from stock dividends cannot. This crucial difference between the two makes real estate a more advantageous asset class for tax purposes. In other words, interest and depreciation costs are deductions from ordinary income that may result in expected losses.

These factors lead many real estate investors to choose direct ownership of real estate over investing in publicly traded REITs (whether through a fund or another vehicle). Ordinary income tax is levied on REIT payouts, like on distributions from any other stock.

But real estate investors are not exempt from responsibility. Instead, they must pay capital gains tax on the asset when sold, which might be expensive depending on the property’s original basis.

However, there are other ways to postpone paying capital gains tax, sometimes indefinitely.

3.1031-Exchanges: Section 1031 exchanges allow investors to exchange one rental property for another without paying taxes on the gain from selling their old property as long as certain requirements are met. This allows investors to defer capital gains indefinitely by switching out one investment for another without having to pay taxes until they actually sell their current property.

This is especially helpful when an investor has owned a property for a long enough period to exhaust depreciation. Using a 1031-exchange to reinvest the sales proceeds, the investor assumes a lower tax basis in the new asset, which often represents the delayed gain. The investor would have a different cause that may be depreciated if the newly purchased property has a higher value than what was sold.

Although this is a fantastic instrument for capital preservation, because the IRS regulations surrounding 1031 exchanges are so complicated, private investors frequently hesitate to use them. Investors must meet several strict deadlines for the trade to be approved. Usually, expert advice is required.

The management of 1031 exchanges is better suited to real estate private equity groups. The tactic is most frequently employed by funds that perform their own 1031 exchanges or set up tenants-in-common arrangements that provide investors immediate title to the asset. These laws prohibit a limited partner or member of an LLC from trading a real estate partnership or LLC sales distribution earnings.

The Bottom Line

Multifamily investing offers investors incredible tax benefits. When done right, your tax burden and liability can be significantly reduced and even eliminated. When deciding on multifamily real estate for investment, deciding what type of real estate to invest in should also be based on your goals and objectives. 

 

What Are the Common Mistakes in Real Estate Syndication?

Real estate syndication

One of the best ways to raise money for your real estate investment is through real estate syndication. The sponsor and an investor or group of investors are engaging in a straightforward transaction. On the other side, just like any commercial transaction, many investors fall short because they lack sufficient knowledge and planning.

Syndicating (or pooling) of your money with others to buy significant commercial real estate projects is a great idea – if executed well .  If bought at the correct price and managed properly, it is a tried-and-true method for building wealth. This recession is a perfect example of how not all real estate classes and operators are created equally. You must stay away from these eight common blunders when working on real estate syndication initiatives!

  1. An inexperienced operator with no track record of operations.

Many syndicators have had some success in obtaining capital, often for deals involving flow-through taxes or for other parties. They simply receive a commission. Hey, let’s start a syndication company, they suggest. Purchase a piece of property, manage it, and earn a commission and operating profit. In many situations, this is a big mistake because it takes years to learn how to buy, even more years to learn how to buy wisely and not overpay, and even more years to learn how to maintain an asset well. This is especially true in a more steady, less volatile economy!

Check their background and breadth of expertise in the asset market they operate in as a result.

  1. Exorbitant Fees, typically Paid Upfront and Independent of Project Success!

Some syndicators charge a commission rate in excess of 10%. Although 10% seems to be the standard, it is still high because it must be offset by asset performance, which takes time. Additionally, it’s likely best to limit yearly asset management to no more than 2% of the cash invested or 0.5% of the asset value. Otherwise, the system is unduly biassed in favour of the syndicator rather than the investor. It must be win-win!

Therefore, lower is better!

  1. Unrealistic ROIs based on irrational assumptions

As a high ROI is easily achievable on a spreadsheet or in an advertisement, it is a frequent ploy to use unachievable future values of condos or land prices. But because baby boomers are becoming more cautious and less financially successful, there is less demand in the world today.

The economy has served as a wake-up call to investors who believed they could ride a never-ending real-estate bubble for condo projects, land subdivisions, or international real estate in hot markets like Costa Rica, Mexico, or Belize, even though the housing market has only shown flimsy signs of recovery. Then there is the commercial and office real estate sector, where a lot of institutional investors recently suffered significant losses.

Therefore, can these future values be achieved within the promised timeframes?

  1. A false sense of security

It is created by syndications using terminology like “asset backed,” “up to 18%+ interest on our mortgages,” and “secured by a mortgage.” In many cases, these mortgages are in second or third position and substantially surpass the value of the underlying real estate. In land development or construction projects, the investor’s money sometimes comes in second or third after an expensive first position—barely security and definitely a fake! If it is actually equity or investment money, don’t refer to it as a mortgage.

As a result, deceptive advertising is used when a security is not first or above going prices and is based on future speculative probable prices.

  1. The executives who were accused.

So, investigate the initiative and the individuals involved. What did they do before starting this project? Are they experts in the field? Do they have a good reputation? If there are any complaints about them, check them out first.

Another common mistake is choosing the wrong type of property for syndication. Not all properties are suitable for syndication, so it’s important that you find out whether your chosen property is right for this type of investment or not. You should also make sure that there aren’t any problems with the property before signing up for it, such as building defects or legal issues relating to ownership (this can be checked with a lawyer).

  1. Big ads offering enormous gains. 

The real estate market is not a get-rich-quick kind of scheme. If you are investing in syndication, you are looking to make a long-term investment with gradual returns. You should not expect to see huge gains quickly and easily; this is not what real estate syndications are about. In fact, most syndications are purchased using your own funds as a business expense. So, in addition to (large) commissions, search for soft charges. More money raised is not appropriate; 2.5% to 3.5% is!

  1. Not taking ownership of the asset despite their marketing’s promises.

Make certain the investors really do own the item! Frequently, the asset is not held by the investment group but by a shadow business, and the money is lent to them. The money trail is now practically impossible to follow, especially if this shadow business also shares numerous other assets and multiple mortgages. So, even your project could be derailed by one failed, unrelated project!

Conclusion

One of the most potent and successful ways to create several sources of income is through real estate syndication investing. There will undoubtedly be mistakes made along the way, but obtaining financial independence is worth it in the end.

However, thorough due diligence is a requirement and the only way to feel confident about making an investment in any venture. Pull the trigger with assurance if everything looks excellent and the arithmetic is correct.

Schedule a free strategy call to know more about investing in syndications. Growth capital group is here to help you.

 

 

US Housing Market Is A Hedge Against Inflation

According to recent headlines, inflation is at its highest level in more than a decade, the situation is unstable, and the future is unknown. What, though, is the genuine tale? Why is inflation such a worry right now, and how can you safeguard yourself from its consequences?

We may put this increase in inflation down to Covid-19 or, more particularly, our return to everyday living at the speed of light, just like many other aspects of our existence that have been normal over the previous year. We’re on the road returning to work. There are open restaurants. 

The news of a recovering economy is terrific. But the potential repercussions are what worries economists. Spending too much too quickly could result in an overabundance of demand, which could then cause significant inflation if we party as if it’s the Roaring Twenties.

What Led To This Record-Breaking Rise In Inflation?

Have you ever heard someone whine about how two movie tickets and popcorn used to cost $5? They are referring to inflation, which is the gradual increase in the cost of goods and services.

It’s a naturally occurring economic phenomenon that typically increases gradually but steadily. However, that constant slope may rise to the height of a mountain in the face of a catastrophe like a global epidemic. For example, the Consumer Price Index (CPI), a gauge of inflation, has increased by 5% over the past year, according to the most recent report from the U.S. Bureau of Labor Statistics. 

It’s the outcome of several allegedly conflicting causes. The unemployment rate has decreased to 5.2% from 11.2% in June 2020. But, on the other hand, producers and retailers are reporting shortages of everything from diapers to chicken wings, and car rentals in some cities can cost up to $700 per day.

Overall, it presents a quick-changing, unstable economy characterized by high demand, low supply, and significant uncertainty: How long will this inflation last?

Including assets regarded as hedges is one technique to make sure that the solution doesn’t have a detrimental effect on your portfolio. A hedge, expressed simply, is a “just in case” investment that typically moves against the market or is not prone to extreme volatility. Hedging is regarded as a component of a diversified portfolio since it may be able to reduce losses if the market experiences significant swings in response to factors like inflation.

Various assets, including bonds, gold, other commodities, and real estate, are frequently recommended as safe investments against inflation.

How Real Estate Acts as a Hedge Against Inflation

The impact of inflation on debt comes first. The loan-to-value of any mortgage debt decreases when a home’s value increases over time, acting as a natural discount. As a result, the property’s equity rises, but your fixed-rate mortgage payments stay the same.

Given that increasing housing prices frequently translate into higher rent, inflation also benefits real estate investors who generate revenue from rental properties, particularly those in property sectors with short-term lease structures like multi-family buildings. As a result, it may be possible to put more money in your pocket if you can increase your rent while keeping your mortgage the same.

Finally, because property values tend to increase steadily over time, real estate can be an excellent hedge against inflation. For example, in less than ten years, the majority of the properties whose prices plummeted when the real estate bubble burst in 2008 had recovered to their pre-crash levels. As a result, real estate investments have the potential to outperform inflation in terms of value and can offer investors a possible source of recurrent income.

Purchasing a multi-family Property is one strategy to use real estate as an inflation hedge. Individual rental units often have annual lease renewals, unlike some commercial assets like retail stores or restaurants, which typically have multi-year company leases. As a result, you will be allowed to change the rent regularly as a building has more units.

Multi-family assets, such as investing in apartment buildings, are also a particular asset class since they are continually in demand (significantly when housing prices rise), but they also experience a high turnover rate of 47.5%. In addition, a restricted supply of structures or new construction projects may result from rising labour and material prices and increasing rental rates and property values. Together, these two elements result in a building that won’t be empty for extended periods and numerous chances to sign new leases or renew existing ones at prices that are in line with the market.

Another thing to keep in mind is that another lease component,—expense reimbursements—is another way real estate can keep up with inflation. No matter what kind of physical structure a property has, leases transfer part of the operational costs of that property down to the tenants. For instance, with a triple-net lease, the renter is entirely responsible for all costs associated with the property. As a result, landlords and owners may be partially protected from the effects on the property’s cash flow if utilities and maintenance costs increase in line with inflation.

Conclusion 

We can’t prevent some parts of inflation, such as more incredible consumer goods prices and rising interest rates. The good news is that real estate is one strategy to protect yourself even if the prophecies come true.

Schedule a Free Strategy Call with Us if you would like to learn more about real estate investing strategies. Growth Capital Group can help you to achieve your investment goals today.

How To Start Investing In Apartment Buildings for Passive Income 

Do You want passive income but are unsure about where to begin? Investing in apartment buildings is a wise financial decision that might assist you in building money over time. However, you must first grasp the fundamentals and have a well-thought-out plan before investing.

With the help of this detailed article, start investing in apartment buildings. To build your portfolio for passive income, learn how to make wise judgments, identify properties, and create a plan.

Investing In Apartment Buildings 

Real estate investing’s attractive and reliable returns are no longer a secret. You can pick from several investment possibilities today to help you achieve your financial objectives and desires.

Apartment complex investing is becoming increasingly popular as people look for a promising asset class that offers less financial risk and a steady, reliable cash flow.

In urban areas worldwide, there is a rising demand for cheap housing. Apartment buildings are ideal for many investors, including busy professionals, medical professionals, lawyers, CEOs, young professionals, and singles who all need a place to call home.

Despite how promising it is, there are a few factors that passive investors should know before investing.

The advantages of multifamily properties over single-family homes include improved cash flow, lesser investment risk, and the ability to scale up apartment buildings. But that’s only the start! Here are a few more explanations for investing in apartment buildings.

  • High Demand for apartment homes
  • Strong and Stable Cash Flow
  • Scalable Property Management
  • Forced Property Appreciation
  • Tax Advantages
  • Create Generational Wealth

How To Start Investing In Apartment Buildings 

To get you started on learning the formula for apartment investing, we’re going to go over some secrets to creating significant cash flow in the apartment complex market. Understanding the approach to accumulating seven-figure wealth through real estate investing is essential.

Here are some tips for how to start investing in apartments:

  • Know Your Goals

Before even thinking about what kind of property you want to buy, it’s essential to have your goals clearly defined so that you can determine your investment strategy. If you want passive income, look at properties with high rents and low turnover rates (good for cash flow). If you want growth potential, look at properties with high appreciation rates and strong rental demand from local job growth and college enrollment trends (suitable for capital appreciation).

There are many different strategies when it comes to investing in apartment buildings. However, most investors have a specific goal to maximize their returns on investment (ROI) when buying a property. Here are a few common goals:

Cash Flow – A cash flow strategy ensures that the rental income covers all expenses and provides positive cash flow each month. This allows you to pay yourself back over time rather than selling the property immediately or borrowing more money to cover expenses during tough times.

Value Appreciation – The value appreciation strategy focuses on finding properties that will increase in value over time through appreciation of real estate prices, not increasing income from renting apartments.

Rental Income – This strategy focuses on maximizing rental income by finding high-demand areas where rents are rising quickly and building up enough equity in your portfolio to take advantage of these trends by selling one or more properties at once or using them as collateral for further borrowing against them.

  • Syndication: 

Syndications raise money from investors wanting to play a passive real estate investment role. In this scenario, the person in charge of the syndication would be in the order of all meaningful choices about the selected apartment complex. You must add your funds to the collection to benefit from future gains.

  • Real Estate Fund: 

On a broader scale than syndications, real estate funds are similar. However, these funds frequently require more extensive minimum commitments and make many real estate investments at once. Additionally, you might not know how your money is being utilized, so learn as much as possible about a fund before investing in it.

  • REITs

An organization that handles real estate investments, which frequently include apartment buildings, is known as a REIT. Similar to purchasing shares in any other firm, you are investing in the company when you invest with a REIT.  Real estate investment trusts are a great way to invest.

  • 1031 Exchange :

A 1031 exchange is a tax-deferred exchange of a property for an equal or more excellent value. It allows you to sell one property and purchase another without paying taxes on the sale of your old property, as long as you reinvest the proceeds in real estate within 180 days. The money you receive from selling your old property goes into an exchange account, which is used to purchase a new property within those 180 days.

Final Thoughts 

Apartment complex investing is a significant undertaking that, when done well, may bring in sizable financial returns and even generate a stable passive income for you.

However, it is advisable to work with experienced syndicators if you want to create a passive income stream and benefit from portfolio diversification with this valuable asset class without having to take on the responsibility and time commitment of managing it yourself.

Schedule a Free Strategy Call with Us if you’d like to learn more about how to create passive income streams by investing in multifamily real estate. Growth Capital Group is here to help you achieve your investment goals today.

 

How Do You Find A Passive Real Estate Investment Opportunity?

Investment properties are an excellent source of income. They have a high return on investment and the funds invested in them allow you to take advantage of compounding returns over a long period of time. Before you decide to invest, it is essential to understand the process and learn what you will need in order to make it work out for you. This article will teach you all about passive investing in simple steps.

Passive investing is a term that’s thrown around a lot, but what does it mean?

Passive investing refers to an investment strategy where you buy and hold investments with the goal of producing returns over time. Passive investing doesn’t mean you don’t have to pay attention to your portfolio, but it does mean that you won’t be making trades on a daily or weekly basis as part of your strategy.

The goal of passive investing is to earn returns over time through the magic of compounding. Compounding is when your investments earn interest in addition to the return on principal that occurred when you first invested. So if you invest $1,000 today at 5% interest and then reinvest all interest payments each year for 10 years, at the end of the decade, you would have about $1,208 ($1,020 + $188). Not bad! But if instead you took all those interest payments and added them to your original investment amount each year, then at the end of 10 years you would have about $1,500 ($1,000 + $500). That’s why compounding is so powerful.

How Do You Find A Passive Investment Property?

Passive investment properties are rental properties that require very little maintenance and management. These types of investments are ideal for people who are looking to use their money in other ways or those who don’t have time to manage a property.

A passive investment property is one in which you have almost no control over how the asset is managed. At the highest levels, you invest your money and then, in a sense, step back, with any return being provided without your involvement.

Passive investment properties can be found using the following methods:

  1. Rentals: Finding a rental property can be challenging, but there are websites dedicated to helping you find them (such as Craigslist and Zillow). You can also talk with real estate agents about what’s available in your area
  2. Lease options: This is one of the most popular ways to get into the real estate business without having to actually own an entire property yourself. With lease option agreements, you can rent out a property for a set period of time (usually 6 months) then decide whether or not you want to buy it at the end of that period

How Do You Evaluate The Deal?

Evaluating a deal is a way to assess the value of an investment. It’s also a way to determine whether it’s worth buying or selling.

There are many different ways to evaluate a deal, including:

Price-to-earnings ratio (P/E) — This measures how much investors are paying for each dollar of earnings. A high P/E might mean that investors think the company will grow rapidly, but it could also mean that they think the stock price will fall.

Price-to-book value (P/B) ratio — This measures how much investors are paying for each dollar of assets on the balance sheet. A low P/B might indicate that investors think the company will grow more slowly, but it could also mean that they think the stock price will increase.

Dividend yield — This indicates how much cash flow is paid out in dividends per share each year. A low dividend yield might mean that investors think profits will fall in future years or that they expect the stock price to rise dramatically before then, or both!

Cash flow yield — This indicates how much cash flow is available after all expenses are paid out each year as compared with stocks outstanding on the balance sheet. A high cash flow

Managing Your Passive Investment Property

You can manage your own investment property or hire a third party to do it for you. If you choose to manage it yourself, there are some key factors to consider:

Do you have the time and knowledge required?

How much does it cost?

What are the tax implications?

In the end, however, it’s all about balancing risk and reward. As with investing in any kind of property, choosing a lower-risk investment property will generally allow you to make less on your return while guaranteeing a certain amount of income. A higher-risk investment property, on the other hand, will make you more money but come with greater risk. Choose wisely, and use these guidelines to get started!

Conclusion –

These are just some of the topics to be covered in our complete guide to choosing passive investing properties. The one thing that you can take away from this article is choosing the right property will lead to a better investment. Which will ultimately lead to more profit for your portfolio. So make sure you don’t overlook the little details when it comes time to decide on a new asset.